Drop in high US fuel prices

Rising fuel costs have darkened the outlook for the US recovery and subsumed the White House race like an oil slick would a fledgling, yet despite the gloom, prices may have already peaked.

In the last week the average price of a gallon –nearly four litres – of gasoline has fallen three cents to $3.91 in the United States.

Europeans may scoff at that paltry cost, and the drop itself may not seem like much, but for millions of Americans struggling to get from A to B with their wallets intact, it is a U-turn in the right direction. “After rising for all but four days in February and March – an increase of 38 cents during that period – prices have been down more days than they’ve been up in April,” said Avery Ash of the American Automobile Association.

The recent price dip, which has echoed a similar dip in crude prices, has left economists and consumers wondering whether the pain at the pump may have peaked or just temporarily eased.

Since late last year energy prices have increased dramatically, driven by tensions with Iran, unseasonably warm weather and stop-start global demand.

According to analysts, fears of an abrupt halt in supply from Iran or a related blockage of nearby shipping routes has alone resulted in a $10-15 premium on a barrel of crude, which costs around $104 in New York today. But these and other pressures have ebbed recently.

On Thursday the official US statistics showed that business gasoline costs fell two per cent, when seasonally adjusted. Meanwhile, high prices have gone a long way toward squeezing demand.

In February oil imports fell to 7.8 million barrels of crude a day from 8.7 million barrels.Tensions with Iran may yet resurface as November’s US election grows near, and a long hot summer could bring rising demand and prices to match.

The US Energy Information Administration has predicted that average prices may again rise before falling.